Good Looks Fitness operates a large fitness centre in a University Town. Being the newest fitness centre in the area with the most modern and best equipment and staff Good Looks believes they can set their price at a level above their competition. The owners would like to earn a 15% return on the company's $2,000,000 in assets. The company incurs primarily fixed costs to maintain and staff the centre. Good Looks projects fixed costs to be $580,000 fixed costs for the upcoming year. Good Looks is a pay per use facility and expects to serve 55,000 customers during the year. Variable costs are estimated at $5 per customer visit.
Required:
1. What price per visit must Good Looks charge to earn the owners desired profit?
2. What is the revenue surplus or shortfall if Good Looks charges $20 per customer visit?

Question

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The Answer of Good Looks Fitness operates a large fitness centre in a University Town. Being the newest fitness centre in the area with the most modern and best equipment and staff Good Looks believes they can set their price at a level above their competition. The owners would like to earn a 15% return on the company's $2,000,000 in assets. The company incurs primarily fixed costs to maintain and staff the centre. Good Looks projects fixed costs to be $580,000 fixed costs for the upcoming year. Good Looks is a pay per use facility and expects to serve 55,000 customers during the year. Variable costs are estimated at $5 per customer visit.
Required:
1. What price per visit must Good Looks charge to earn the owners desired profit?
2. What is the revenue surplus or shortfall if Good Looks charges $20 per customer visit?

Good Looks Fitness Operates a Large Fitness Centre in a University